Onshore services work gains steam

Published 11:49 pm, Friday, March 15, 2013

Onshore oil field service activity is picking up again after a difficult 2012, when low prices and a warm winter gutted the demand for natural gas production.

Natural gas prices have risen, reaching $3.872 per million British thermal units on Friday, after bottoming out at under $2 in mid-2012, and large oil field service providers are firing up their rigs.

Halliburton has estimated that its rig count in North America will increase by about 100 rigs, and Baker Hughes believes that it will add 100 to 150 active rigs in the coming months, according to a Barclays analyst note issued Friday.

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Other analysts say a rise in onshore oil exploration is driving the increased activity, along with higher natural gas prices.

"It is apparent that the rig count has bottomed," wrote David White, assessing the future of onshore drilling in a post for the website Seeking Alpha.

"Looking forward, I expect that the number of oil rigs in the U.S. will start to rise again as new oil fields such as the Utica ramp up their exploration and production activities. Plus, with the rebound in natural gas prices, we may see a small rebound in natural gas drilling."

White said big new plays also are pushing up the rig count overseas. The Cooper Basin in Australia and the Vaca Muerta in Argentina have driven up international demand, he wrote.

The increased complexity of hydraulic fracturing also is boosting demand for onshore services, as operators find ways to use the technology to increase the amount of hydrocarbons extracted. Fracturing involves sending a mix of water, sand and chemicals into a reservoir to force oil and gas out of shale or other tight rock.

White wrote that at its inception, hydraulic fracturing typically was done in five stages, but it now involves 30 or more stages in some cases."